The Impact of Financial Crisis on MFIs Performance in Zimbabwe

Patience Hlupo Ms, Bindura University of Science EducationFollow
Tafadzwa Mukute Mr, Bindura University of Science EducationFollow
Tough Chinoda Ph.D., Women's University in AfricaFollow
Edson Chagwedera Mr, Ezekiel Guti UniversityFollow

Abstract

Our study explores the impact financial crisis has on performance of microfinance institutions in Zimbabwe employing the Vector Autoregression using annual time series data from 1990 to 2018. The findings from our study revealed a positive impact of financial crisis on performance of Microfinance Institutions. We also found a positive effect of gross domestic product, money supply, the first lag of inflation and exchange rates on microfinance institutions performance while the second lag of inflation has a negative effect. Variance decomposition results reveal an increasing long run positive effect of financial crisis on performance is increasing. From impulse response analysis, one standard deviation shock to financial crisis causes microfinance institutions performance to significantly fluctuate up to period 10 where the graph of performance becomes negative. The study recommended policy makers to enforce clearness in all MFIs so as to uncover any form of disfigurement in the financial sector’s balance sheets. Tightening regulation of MFIs will also go a long way in ensuring their success. For MFIs to benefit from the positive impact of the exchange rate and inflation on their performance, the government needs to work on reviving the value of the Zimbabwean dollar and make it more competitive internationally.

JEL Codes

G11, G21, G28, G20

Keywords

Performance, Microfinance Institutions, Financial Crisis, Vector Autoregression, Impulse Response, Forecast Error Variance Decomposition

Recommended Citation

Hlupo, Patience Ms; Mukute, Tafadzwa Mr; Chinoda, Tough Ph.D.; and Chagwedera, Edson Mr (2022) "The Impact of Financial Crisis on MFIs Performance in Zimbabwe," The Journal of Entrepreneurial Finance: Vol. 24: Iss. 2, pp. 77-102.
DOI: https://doi.org/10.57229/2373-1761.1415
Available at: https://digitalcommons.pepperdine.edu/jef/vol24/iss2/4